Download - Warm Up 10/1/13
Warm Up 10/1/13
1. What do you think is the richest country in the world today?
2. How do you think economists should measure a country’s wealth?
We will take some notes today
• Microeconomics – study of individuals and the economy
• Macroeconomics – study of large organizations and countries and the economy
• Finance – study of investment and credit
Finished with Microeconomics
Gross Domestic Product
• A measure of a country’s economy
GDP
• All consumer spending within a country in a certain year, month or quarter
GDP• All private investment
within a country in a certain year, month or quarter
• IOW: (saving)
GDP
• All net exports from a country in a certain year, month or quarter
• Exports = goods shipped to other countries
• Imports = goods brought into a country from another country
GDP• All government
spending in a country in a certain year, month or quarter
• Examples: education, military, welfare, social security, roads, healthcare, etc
GDP
• What economic activity did I leave out?
• 2 ways GDP might be misleading?
GDP per capita• Population measuring:
– Divide GDP by population
GDP per capita $s GDP per capita $s
Luxembourg 57 704 EU (established 15 countries)
28 741
United States 39 732 Germany 28 605
Norway 38 765 Italy 27 699
Ireland 35 767 Spain 25 582
Switzerland 33 678 Korea 20 907
United Kingdom 31 436 Czech Republic 18 467
Canada 31 395 Hungary 15 946
Australia 31 231 Slovak Republic 14 309
Sweden 30 361 Poland 12 647
Japan 29 664 Mexico 10 059
France 29 554 Turkey 7 687
Source: OECD World Economic Factbook, 2006 edition
GDP Calculation
Y = C + I + E + G
where
Y = GDP
C = Consumer Spending
I = Investment
E = Exports - Imports
G = Government Spending
United States GDP 2003
Y = C + I + E + G
$$ in Billions
Consumer Spending = $7605
Investment = $1606
Exports = $1021
Imports = $1508
Government Spending = $2017$7605 + 1606 + (1021-1508) + 2017 = $10,741 (2003)
Netherlands GDP 2003
Y = C + I + E + G
$$ in Billions
Consumer Spending = $400
Investment = $104
Exports = $339
Imports = $305
Government Spending = $131$400 + 104 + (339-305) + 131 = $669 (2003)
Per capita: 669,000,000,000/16,000,000 = $41,812.50
16 million Dutch citizens
3. Calculate the GDP for the Netherlands4.Calculate the GDP/capita
5.How can GDP be a limited measurement?